Existing law, commonly known as the “ABC” test and codified by AB 5, makes it more difficult for companies to classify workers as independent contractors rather than employees. The hiring entity has the burden of establishing that an individual is an independent contractor, not an employee, under the “ABC test.”
Under the existing “ABC” test, a worker will be deemed to be an employee, unless the hiring entity proves: (A) that the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact; (B) that the worker performs work that is outside the usual course of the hiring entity’s business; and (C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed. Each of these requirements needs to be met in order for the presumption that a worker is an employee to be rebutted, and for a court to recognize that a worker has been properly classified as an independent contractor.
Existing law contained certain exceptions from the “ABC” test for certain categories of workers. AB 2257, signed by Governor Newsom on September 4, 2020, will add some additional exceptions to the “ABC” test. Exemptions were added for musicians, writers, photographers, tutors, interpreters and other industries. The bill additionally exempts certain occupations in connection with creating, marketing, promoting, or distributing sound recordings or musical compositions. The bill also exempts a musician or musical group for the purpose of a single-engagement live performance event from the “ABC” test, thus making it easier to classify such musicians as independent contractors. This will allow industry professionals and musicians to accept freelance work once again. AB 2257 additionally exempts artists, appraisers, insurance field representatives, and youth sports coaches, allowing them to work as independent contractors.
However, each of the foregoing exceptions contains numerous criteria that must be satisfied before a hiring entity can rely on the new exemptions rather than applying the “ABC” test. For example, musicians and vocalists who are not royalty-based participants in the work created during a specific engagement must be treated as employees for purposes of receiving minimum and overtime wages for hours worked during the engagement.
For a still photographer, photojournalist, or videographer, in order to avoid the “ABC” test and be classified as an independent contractor, the worker must work under a written contract that specifies the rate of pay, the worker must not be replacing an employee who performed the same work at the same volume for the hiring entity, the worker cannot primarily perform the work at the hiring entity’s business location, and the worker cannot be restricted from working for more than one hiring entity.
Therefore, although additional occupations and industries have been added to AB 5 as exempt from the “ABC” test, each occupation or worker must be individually analyzed pursuant to the specific criteria set forth in AB 5, as amended by AB 2257.
If you would like more information on how this new law could affect your hiring of workers, contact Schneiders & Associates, L.L.P. today.